Testimony, Comments & Press Releases

UNITED STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Regulation of Short-Term Natural Gas: Docket No. RM98-10-000:

Transportation Services :

Regulation of Interstate Natural Gas : Docket No. RM98-12-000:

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NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER

ADVOCATES’, PENNSYLVANIA OFFICE OF CONSUMER

ADVOCATE’S, AND OHIO OFFICE OF CONSUMERS’

COUNSEL’S REQUEST FOR REHEARING

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 Pursuant to Rule 713 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.713, and Section 19 of the Natural Gas Act, 15 U.S.C. § 717r, the National Association of State Utility Consumer Advocates ("NASUCA"), the Pennsylvania Office of Consumer Advocate ("Pa. OCA") and the Ohio Office of Consumers’ Counsel ("OCC"), separately and jointly, respectfully request rehearing of the Commission’s Final Rule issued in Order No. 637 in the above-captioned dockets. Regulation of Short-Term Natural Gas Transportation Services and Regulation of Interstate Natural Gas Transportation Services, Order No. 637, Docket Nos. RM98-10-000 and RM98-12-000, 90 FERC ¶ 61,109 (2000) (hereinafter "Order No. 637"). NASUCA, the Pa. OCA and OCC generally support the Final Rule, but seek rehearing on the following limited issues: a) peak and off-peak rates for pipeline short-term transactions;

b) treatment of revenues from new services te be implemented in lieu of penalties contained in current pipeline tariffs; and c) matching price term for the Right of First Refusal. NASUCA, the Pa. OCA and OCC are also joining in the rehearing request filed this same day by the Pipeline Transportation Customer Coalition requesting that the deadlines for compliance filings implementing the Order No. 637 requirements be staggered in order to provide all parties a meaningful opportunity to comment thereon.SPECIFICATION OF ERROR

NASUCA, the Pa. OCA and OCC submit that Order No. 637 contains the following legal errors:

a) The Commission’s provision in Order No. 637 allowing pipelines to implement off-peak rates for short term pipeline transactions is arbitrary and capricious and not based on reasoned decision-making because it fails to protect captive customers against the pipeline’s ability to exert market power; and allows the pipeline to retain an excessive share of excess revenues generated from such rates;

b) The Commission’s provision in Order No. 637 allowing pipelines to retain all revenues obtained from implementing new services intended to replace the penalty provisions in current tariffs is arbitrary and capricious and not based on reasoned decision-making because the policy continues to allow the pipelines to financially benefit from services intended to protect the integrity of the system for firm shippers and uses facilities to provide those services which long-term shippers have paid for under Straight Fixed-Variable rates; and

c) The Commission’s provision in Order No. 637 allowing pipelines under constrained conditions to require Right of First Refusal customers to match a price bid higher than the pipeline’s prevailing maximum tariff rate for the pre-existing service is arbitrary and capricious and not based on reasoned decision-making because it effectively accomplishes rolled-in rates on a customer-by-customer basis in violation of the Commission’s stated policy of preferring incremental rates for expansion projects and because it violates the filed rate doctrine.

 Summary of Argument

The Commission’s Order No. 637 generally promotes greater competition in markets for interstate pipeline capacity, while protecting captive consumers from the pipelines’ ability to exert market power. However, the Final Rule fails to protect captive consumers from the pipelines’ ability to exercise market power in three respects: a) the provision for peak and off-peak rates for short-term pipeline transactions; b) the provision allowing the pipelines to retain all revenues associated with implementing new services in order to avoid imbalance and Operational Flow Order penalties; and c) the provision requiring Right of First Refusal ("ROFR") customers to match a price term higher than the prevailing tariff rate for their service. While Order No.637 generally provides for the development of more competitive markets for both gas supply and pipeline capacity, pipelines continue to retain market power in the provision of both short-term and long-term transportation services.

First, the Commission’s decision to allow pipelines to implement peak and off-peak rates for short-ter

National Association of State Utility Consumer Advocates
8380 Colesville Road, Suite 101, Silver Spring, MD  20910
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